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Masonic Association of Utica, NY v. West American Insurance Co.

March 30, 2010

THE MASONIC ASSOCIATION OF UTICA NY, PLAINTIFF,
v.
WEST AMERICAN INSURANCE COMPANY, THE OHIO INSURANCE COMPANY, OHIO CASUALTY CORP., LIBERTY MUTUAL GROUP, DEFENDANTS.



The opinion of the court was delivered by: Neal P. McCurn, Senior United States District Judge

MEMORANDUM-DECISION and ORDER

This is an action originally brought in New York State Supreme Court on April 21, 2008, by the plaintiff Masonic Association of Utica, N.Y. ("Association") against defendants West American Insurance Company ("West"), the Ohio Insurance Company, Ohio Casualty Corporation, and Liberty Mutual Group (collectively, "defendants"), for breach of contract and egregious tortious conduct. Defendants removed the case to this court on May 23, 2008, pursuant to 28 U.S.C. § 1332(a) and 28 U.S.C. §1441. Accordingly, the court has jurisdiction over this action. Currently before the court is defendants' motion to dismiss pursuant to Fed.R.Civ.P. Rule 12(b)(6) and/or 12(c) (Doc. No. 12), and defendants' motion for summary judgment (Doc. No. 22). For the reasons set forth below, the court denies defendants' motions, and grants plaintiff's request to amend its complaint in accordance to this decision and order.

I. FACTS

In its complaint, plaintiff alleges that on March 3, 2006, defendants issued their renewal policy ("the policy") to plaintiff for the period April 27, 2006 to April 27, 2007, covering plaintiff's property located at 251 Genesee Street, Utica, NY 13501 (the "insured premises"). The policy contains limits of liability in the amount of $1,000,000.00. At all relevant times, plaintiff was the named insured on the policy, and the policy was in full effect on March 11, 2007. On that date, a part of the north wall of the insured premises collapsed. On March 12, 2007, defendants were placed on notice of the loss when the property loss notice form was filed by the agent for plaintiff and defendants, Turnbull Insurance. On March 13, 2007, the insured premises were inspected and photographed by the defendants' adjuster. On April 5, 2007, defendants had the premises inspected by their agent Peter C. Cedrone of Cedrone Civil/Structural Engineering, P.C., who rendered his findings via report issued on April 26, 2007. On June 8, 2007, the defendants issued a letter denying coverage for the property loss. Plaintiff asserts that despite repeated demands, defendants have failed, refused and neglected to compensate plaintiff for its loss as defendants are required to do under the terms and conditions of the policy, or to justify the denial of plaintiff's claim in any meaningful or comprehensive fashion.

On August 12, 2008, defendants came before the court to argue that plaintiff's cause of action for bad faith must be dismissed, and plaintiff's claims for punitive damages and attorney fees must be denied, for failure to state a claim. Doc. No. 12. In addition, defendants filed a motion for summary judgment on March 31, 2009, requesting that this court dismiss plaintiff's breach of contract claim. In the interest of judicial efficiency, the court considers these motions together, and for the reasons set forth below, denies both motions.

II. DISCUSSION

A. Standard for Motion to Dismiss

Defendants move to dismiss plaintiff's second cause of action pursuant to Fed.R.Civ.P. Rule 12(b)(6) and/or 12(c). "The standard for granting a Rule 12(c) motion for judgment on the pleadings is identical to that of a Rule 12(b)(6) motion for failure to state a claim." Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001). "In both postures, the district court must accept all allegations in the complaint as true and draw all inferences in the non-moving party's favor. The court will not dismiss the case unless it is satisfied that the complaint cannot state any set of facts that would entitle him to relief." Id. (internal citations omitted). In the case at bar, defendants assert that the plaintiff has made "bald conclusory allegations without absolutely any factual support whatsoever," and the complaint "as presently pleaded, fails to state a viable cause of action supporting a cause of action for 'bad faith.'" Doc. No. 12-1 at p. 6.

The function of a motion to dismiss is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Ryder Energy Distribution v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When deciding a motion to dismiss, the court must accept as true the well pleaded allegations of the complaint. Albright v. Oliver, 510 U.S. 266, 268, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994). As stated above, the allegations of the complaint should be construed favorably to the pleader. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct 1683, 40 L.Ed.2d 90 (1973).

Here, in that portion of plaintiff's complaint relevant to the motion to dismiss currently before the court, plaintiff's second cause of action alleges bad faith on the part of the defendants, and seeks punitive damages and attorney's fees. "Under New York law, 'damages arising from the breach of a contract will ordinarily be limited to the contract damages necessary to redress the private wrong, but ... punitive damages may be recoverable if necessary to vindicate a public right.'" Fabrizio v. Erie Ins. Co., 2009 WL 427102 at * 3 (N.D.N.Y. 2009) (citing New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 315, 639 N.Y.S.2d 283, 662 N.E.2d 763 (1995). The New York Court of Appeals has stated that

[p]unitive damages are available only in those limited circumstances where it is necessary to deter defendant and others like it from engaging in conduct that may be characterized as "gross" and "morally reprehensible," and of such wanton dishonesty as to imply a criminal indifference to civil obligations. We set forth in the decision the pleading elements required to state a claim for punitive damages as an additional and exemplary remedy when the claim arises from a breach of contract. They are: (1) defendant's conduct must be actionable as an independent tort; (2) the tortious conduct must be of the egregious nature set forth in Walker v. Sheldon (10 N.Y.2d 401, 404-405, 223 N.Y.S.2d 488, 179 N.E.2d 497, supra); (3) the egregious conduct must be directed to plaintiff; and (4) it must be part of a pattern directed at the public generally.... Where a lawsuit has its genesis in the contractual relationship between the parties, the threshold task for a court considering defendant's motion to dismiss a cause of action for punitive damages is to identify a tort independent of the contract.

Fabrizio v. Erie Ins. Co., 2009 WL 427102 at * 3.

Defendants argue in their moving papers that the plaintiff's complaint does not adequately plead a cause of action for bad faith, i.e., the plaintiff has plead no evidentiary allegations of a tort separate and apart from West American's contractual obligations. Doc. No. 12-3. Plaintiff asserts that its complaint was drafted as a New York State Supreme Court complaint, utilizing the NYS Civil Practice Laws and Rules, and as such, meets the New York Court of Appeals pleading requirements. Defendants then removed the matter to this court and filed the present motion to dismiss. Plaintiff argues that defendants' motion is premature, and plaintiff should be fairly given an opportunity to carry its burden of proof, which would be precluded should the court grant a dismissal at this juncture. Plaintiff requests that, in the alternative to dismissal, it be allowed to amend its complaint. The court is loathe to dismiss plaintiff's claims of bad faith at this juncture, ...


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